Centro and Auditing
Introduction
Centro Properties Group (Centro) owns develops, manages, and leases retail properties in Australia and New Zealand, it oversees a portfolio of more than 100 properties leased to supermarkets, department stores, and other retailers (Hoover’s Inc 2013). Centro created largely by former chief executive Andrew Scott and once valued at almost $10 billion by the market, the share price collapsed in December 2007 when the company revealed that it was struggling to refinance$1.3 billion. Centro was effectively taken over by lenders and remains listed on the Australian Stock Exchange (ASX) with a value of $37 million (Schwab 2011). This essay is going to explain the events leading to the collapse of Centro, analyse the role of the directors and the auditors in the collapse, and discuss the court case Stephen Cougle-who presided Centro’s audit in 2007.
Events result in collapse of Centro
The 2007 annual reports of Centro and Centro Retail Group (CER)-a subsidiary company of Centro failed to disclose significant matters. In the case of Centro, the report failed to disclose some $1.5 billion of short-term liabilities by classifying them as non-current liabilities, and failed to disclose guarantees of short-term liabilities of an associated company of about US$1.75 billion that had been given after the balance date. In the case of CER, the 2007 annual reports failed to disclose some $500 million of short-term liabilities that had been classified as non-current (Ciro and Symes 2013, p.263).
While the Centro board and its auditor PricewaterhouseCoopers (PwC) were derelict in failing to inform shareholders of the current liability levels, that omission was not the only reason for Centro’s collapse. Rather, it was the extraordinary amount of leverage used and the ill-timed acquisition of US-BASED New Plan Excel Realty for $4.7billion in March 2007 that caused the down fall (Schwab 2011).
Centro entered the US in 2006 with its acquisition of Heritage Property
Centro Properties Group (Centro) owns develops, manages, and leases retail properties in Australia and New Zealand, it oversees a portfolio of more than 100 properties leased to supermarkets, department stores, and other retailers (Hoover’s Inc 2013). Centro created largely by former chief executive Andrew Scott and once valued at almost $10 billion by the market, the share price collapsed in December 2007 when the company revealed that it was struggling to refinance$1.3 billion. Centro was effectively taken over by lenders and remains listed on the Australian Stock Exchange (ASX) with a value of $37 million (Schwab 2011). This essay is going to explain the events leading to the collapse of Centro, analyse the role of the directors and the auditors in the collapse, and discuss the court case Stephen Cougle-who presided Centro’s audit in 2007.
Events result in collapse of Centro
The 2007 annual reports of Centro and Centro Retail Group (CER)-a subsidiary company of Centro failed to disclose significant matters. In the case of Centro, the report failed to disclose some $1.5 billion of short-term liabilities by classifying them as non-current liabilities, and failed to disclose guarantees of short-term liabilities of an associated company of about US$1.75 billion that had been given after the balance date. In the case of CER, the 2007 annual reports failed to disclose some $500 million of short-term liabilities that had been classified as non-current (Ciro and Symes 2013, p.263).
While the Centro board and its auditor PricewaterhouseCoopers (PwC) were derelict in failing to inform shareholders of the current liability levels, that omission was not the only reason for Centro’s collapse. Rather, it was the extraordinary amount of leverage used and the ill-timed acquisition of US-BASED New Plan Excel Realty for $4.7billion in March 2007 that caused the down fall (Schwab 2011).
Centro entered the US in 2006 with its acquisition of Heritage Property